Following two years in which it focused heavily on its economic mission, Ben & Jerry’s entered 1999 in a much better position than ever before to tackle social mission objectives. Twelve months later, an assessment of the Company’s performance for 1999 is now possible. How well did Ben & Jerry’s do in achieving social mission objectives in 1999?

For the third consecutive year, Ben & Jerry’s has asked me to serve as outside social auditor and to help answer this question. As in previous years, I have reviewed an extensive amount of information that the Company has provided about its social mission activities, including quarterly self-assessments relative to social mission objectives established at the beginning of the year. I have interviewed employees responsible for key social mission activities. I have also attended quarterly meetings of the Social Mission and Work Culture Committee of the Board. These meetings provided a forum to discuss social mission activities throughout the year with board members and employees.

In parallel with the Company’s self-assessment, my report is divided into two parts. The first part examines Ben & Jerry’s performance relative to key social mission objectives in 1999. The second part covers Company performance on a number of other issues, including issues that have received attention in previous audits. This letter has been reviewed by senior management of Ben & Jerry’s and by members of the Social Mission and Work Culture Committee of the Board, who have offered valuable comment. The conclusions are, however, my own.

Ben & Jerry’s established a set of key social mission objectives for the year in early 1999. The objectives and the Company’s self-assessment follow my report. Some of the 1999 objectives were the direct result of social audit findings in 1997 and 1998, a clear indication that Ben & Jerry’s now uses the annual self-assessment and social audit process to guide its social mission priorities and to measure performance.

Several of 1999’s objectives involved what Ben & Jerry’s refers to as “sustainability” -the broad environmental impact of various business activities. Instead of viewing its business activities as a series of unrelated actions, the Company has begun to consider how its business, as a whole, affects the environment-from the ingredients it buys (and the environmental effects that production of those ingredients has) to the resources (including energy and water) it consumes, to the waste it creates in producing its products. Thus, developing compostable consumer packaging, reducing solid waste and dairy waste associated with production, and working with suppliers, including dairy farmers, to develop environmentally benign agricultural practices are all viewed as part of a unified mission.

Ben & Jerry’s made good progress on several sustainability initiatives in 1999. It was able to convert packaging for about a third of its product line to unbleached paperboard containers. Ben & Jerry’s is the first food product company in the United States to use containers manufactured to avoid chlorine bleaching, which creates deadly dioxin compounds. In another sustainability initiative, the Company reduced significantly the amount of solid waste from incoming ingredient containers. This was accomplished by packaging bulk ingredients in specially designed reusable containers called totes. In both instances, the Company initiated the design and manufacture of the containers as part of an explicit strategy to reduce harmful environmental impacts. A third sustainability initiative involves working with the St. Albans Co-op, which already provides rBGH-free dairy ingredients to Ben & Jerry’s, and outside agricultural experts to find economical ways to reduce nitrogen and phosphorous discharges from dairy farms. This project is just getting underway; if successful, it could not only reduce harmful environmental impacts from Ben & Jerry’s main supplier of dairy ingredients, but it could serve as a model for dairy farms nationwide.

Another key objective for 1999 was to expand the number of PartnerShops-retail locations at which Ben & Jerry’s partners with nonprofits. For the second consecutive year, the Company fell short of the goal it set to open a specific number of new PartnerShops. Although it has added resources, including a much-needed coordinator for PartnerShop operations, Ben & Jerry’s is still having difficulties executing in this area.

At mid-year, the Company launched a new initiative to link franchise development strategies with community economic development. This initiative may suggest ways to link not only with nonprofits, but also to groups and individuals interested in for-profit franchise opportunities in economically disadvantaged areas.

The Company’s partnership with the environmental activist group Greenpeace, intended to raise public awareness about the dangers of dioxin and to encourage Ben & Jerry’s customers to join Greenpeace, never caught on with the public. Numerous promotional efforts, including a membership initiative at Ben & Jerry’s One World One Heart� Festival in June and a Halloween web site special on the dangers of dioxin, failed to generate much interest or many new members. The project may have been too tangential to Ben & Jerry’s core business for consumers to get involved. Organizational changes at Greenpeace also may have made it difficult for that group to focus on the campaign.

On diversity issues, Ben & Jerry’s met its goal to hold diversity training workshops for its employees, and it substantially exceeded its minority purchasing goal for 1999. However, the Company continued to have trouble in recruiting and retaining people of color as employees. This is no doubt in part because Vermont’s population and the Vermont workforce are overwhelmingly white. Even so, the Company’s difficulty in attracting people of color, and the high attrition rate of those who accept employment, remains a matter of concern. Exit interviews over the years have shown that some have left because they consider Ben & Jerry’s to have been an inhospitable place to work.

The Company made excellent progress toward another key objective in 1999-improving its safety record. It strengthened its management capability by hiring a new safety manager and by creating a company-wide Safety Council, whose membership includes all plant managers and senior operating executives. The Company increased capital spending and employee training related to safety.

The safety record for 1999, though mixed, was definitely an improvement over previous years. Although Ben & Jerry’s injury incident rate is still higher than the industry average, the number of severe injuries and the number of days lost as a result of injury both declined in 1999. The Company’s HazMat team responded rapidly and professionally to a potentially dangerous ammonia leak at the Waterbury plant in October. The leak was contained without injury to employees or residents of the surrounding community.

Another key objective in 1999 was to develop a plan for tamper-evident packaging of Ben & Jerry’s pint products. The Company made no progress toward achieving this objective. The Company’s explanation is that its No. 1 packaging priority in 1999 was to introduce unbleached pint containers. It also notes that is has been unable to identify technology that will enable it to use tamper-evident packaging on the new unbleached containers. Left unanswered, however, is the question of whether tamper-evident packaging is, in fact, an important objective.

Ben & Jerry’s took an important step toward integrating social mission considerations into its expanding international business activities with the adoption of its Global Operating Guidelines in 1999. For the first time, the Company now has an ethical framework for choice of markets, selection of partners, and development of social mission activities outside the United States. The hiring of an international Social Mission Coordinator in late 1999 puts the Company in a position to initiate social mission activities in cooperation with its partners abroad. It remains to be seen whether the creation of this framework and the addition of resources will be followed by global social mission initiatives, which have been very modest to date.

The creation of a senior-level Values Council in September provides a new forum to address company-wide social mission activities. The Council has been in existence for too short a period to assess its effectiveness. There is no question, however, that a group such as the Values Council can be helpful in addressing social mission activities, such as sustainability and diversity, that cut across departmental and functional boundaries.

In addition to its focus on key objectives in 1999, Ben & Jerry’s continued to work on a number of other issues related to its social mission. The Company’s self-assessment of these activities comprises the second part of the 1999 Social Performance Report. A review of the Company’s performance on these issues is set forth below.

Ben & Jerry’s reached a contract agreement with the International Brotherhood of Electrical Workers, the collective bargaining agent for maintenance workers at its St. Albans plant, in late 1999. In the end, speculation that large numbers of employees might wish to be represented by a union proved unfounded. Indeed, at the end of 1999 there were fewer members of the IBEW working for Ben & Jerry’s at the St. Albans location than at the beginning of the year; of the Company’s 814 employees, only 16 were union members. Partial unionization of even a small number of employees did, however, alert the Company to the need to develop better communications with all employees.

The Company continued to implement its livable wage policy in 1999, made good on its promise to grant stock options to all employees, and increased its matching contribution to its 401(k) program. All of these actions represented progress toward achievement of the Company’s “linked prosperity” goal.

Gender equity concerns that arose during the 1998 social audit received careful attention in 1999. An in-depth examination of the data, which suggested that among senior managers directly below the Office of Chief Executive Officer women were being paid less than men for comparable work, revealed that the differences were actually very small and due almost entirely to variations in length of service. Women, in fact, were paid more than men in some cases.

Other than the improvements in its safety record discussed earlier, the most notable social mission activity in the operations area in 1999 was in the relationships with socially-aligned vendors. Ben & Jerry’s continued to purchase a significant amount of ingredients from socially-aligned vendors in 1999 at premium-to-market prices. It also provided technical assistance to one of its long-term partners, Greyston Bakery, to assist it in becoming more efficient and more self-sufficient.

In addition to the development of unbleached paper and the introduction of totes, Ben & Jerry’s was able to achieve its company-wide objectives for reduction in dairy waste and solid waste in 1999. This was the fourth consecutive year in which the Company reduced waste levels. It also reduced overall energy use and water consumption. And in a potentially significant sustainability initiative, Ben & Jerry’s also began to examine more systematically than in the past the use of water throughout its operations.

While much attention was focused on developing PartnerShop opportunities in 1999, Ben & Jerry’s also opened 38 new franchise stores. Women or people of color opened three of these stores. At year-end, 15 percent of the Company’s 128 individual franchise partners were women or people of color. Though this represents a significant increase in percentage terms from the previous year, the actual number of women and people of color who are Ben & Jerry’s franchisees remains small. This is an area in which the Company could strengthen its commitment to diversity by more actively seeking out women and people of color.

For the fourth consecutive year, the Company experienced no litigation with its franchisees.

With the adoption of its Global Operating Guidelines, Ben & Jerry’s established a framework to integrate social mission objectives into international business activities. International social mission initiatives so far, however, have been quite modest. The hiring of an international Social Mission Coordinator, based in Europe, provides needed linkage between the Company and its global partners.

Philanthropy remains a well-developed area of social mission activity for the Company. As in years past, Ben & Jerry’s continued to give an extraordinarily high percentage of profits to nonprofit groups in 1999. Through its Foundation, the Company continued its tradition of support for grassroots organizations committed to social change. And through its community action teams, Ben & Jerry’s continued to offer employees many opportunities to participate in defining social mission activities in their communities. The Company also adopted a program to match employee charitable contributions in 1999; about 10 percent of employees took advantage of this opportunity.

As noted earlier, Ben & Jerry’s took several steps in 1999 to align the interests of shareholders and employees, including the granting of stock options to all employees. Shareholders who have purchased shares recently have experienced some appreciation in the value of their shares, but the same cannot be said for long-term shareholders. Speculation about the possible sale of the Company sent share prices up toward the end of 1999, but even so, the Company’s share price at year-end was still below the price at which it sold shares to the public in 1992.

Overall, Ben & Jerry’s made progress on most of its key social mission objectives in 1999. Its most impressive accomplishments were in the area of sustainability and safety. The Company fell short on some objectives, including PartnerShops, though it made progress in that area. Diversity remains an area of concern, particularly in regard to recruitment and retention of people of color. On two issues-the Greenpeace initiative and development of tamper-evident packaging-the Company fell far short of its objectives. The creation of a Values Council and the adoption of Global Operating Guidelines, together with additional staffing in retail operations, safety and international operations, represent important management commitments to social mission activities.

In addition to its record on specific objectives, the Company developed a much greater understanding in 1999 of how its business activities affect its social mission, particularly activities involving an impact on the environment. A wider and deeper understanding of the link between Ben & Jerry’s business activities and the impact of those activities on the environment could create exciting new social mission opportunities in the future.

The Company’s board and management also worked together more harmoniously in 1999. While management and some board members continued to differ on whether the Company was giving sufficient emphasis to the social mission, the board and management nonetheless fashioned a constructive partnership that enabled the Company to make progress toward achievement of both social and economic objectives in 1999.

Over the past three years, Ben & Jerry’s most impressive achievement regarding its social mission is the way in which it has institutionalized the Company’s values into decision-making. The Company’s values are reflected in matters small and large, from decisions on what kind of paper napkins to use in retail outlets to larger strategic decisions involving environmental impacts of pint packaging. The Company has also devoted significant human resources to achieving social mission objectives, and it has created a number of new mechanisms that have enabled it to better manage how it approaches social mission initiatives.

Social mission objectives are part of every manager’s job, from the Chief Executive Officer on down, and these objectives have also been incorporated into the Company’s strategic and operating plans. Ben & Jerry’s effectively uses the social audit not only to evaluate performance, but also to identify areas that need attention. Using the audit as a guide, the Company has devoted more resources to these areas and taken a more aggressive approach to improving performance. Several of the areas in which the Company made strong improvement in 1999-safety, retail operations and establishing a framework for international social mission activities-are areas that previous audits singled out for criticism. While the Company may sometimes have fallen short in achieving its social mission goals, it demonstrates a commitment to progressive values that few companies can match.

James E. Heard

March 2000